A) ABSTRACT / HEADNOTE

This case addresses the principles governing presumptions under the Negotiable Instruments Act, 1881 (NI Act) in cases of cheque dishonor, particularly under Section 138. Here, the appellant, Ajitsinh Chehuji Rathod, was convicted under Section 138 for a dishonored cheque, citing a mismatch of signatures on the cheque. During the trial, he sought a handwriting expert’s opinion to verify the alleged signature mismatch, which was denied by the trial court. The appellate court later dismissed his application to admit additional evidence under Section 391 of the Code of Criminal Procedure, 1973 (CrPC). The Supreme Court emphasized that the presumptions in favor of the cheque’s authenticity under Section 118 of the NI Act are rebuttable, requiring the accused to produce substantial evidence to challenge these presumptions. Since the appellant did not raise his signature defense earlier or substantiate it through questions during cross-examination, the Court found no basis to interfere with the High Court’s ruling.

Keywords: Cheque dishonor, Negotiable Instruments Act, Signature mismatch, Handwriting expert, Section 391 CrPC, Presumptions under NI Act.

B) CASE DETAILS

• i) Judgement Cause Title: Ajitsinh Chehuji Rathod v. State of Gujarat & Anr.
• ii) Case Number: Criminal Appeal No. 478 of 2024
• iii) Judgement Date: 29 January 2024
• iv) Court: Supreme Court of India
• v) Quorum: B.R. Gavai and Sandeep Mehta, JJ.
• vi) Author: Justice Sandeep Mehta
• vii) Citation: [2024] 1 S.C.R. 1083 : 2024 INSC 63
• viii) Legal Provisions Involved:
  • Negotiable Instruments Act, 1881 – Sections 118, 138
  • Code of Criminal Procedure, 1973 – Section 391
  • Bankers’ Books Evidence Act, 1891
  • Evidence Act, 1872 – Section 73
• ix) Judgments overruled by the Case: None
• x) Related Law Subjects: Criminal Law, Banking Law, Negotiable Instruments Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The case focuses on the legal presumptions under Section 138 of the NI Act, particularly the presumption of genuineness of signatures. The appellant’s claim of a signature mismatch, not raised effectively during the trial, became central to his request for additional evidence at the appellate stage. The case provides insights into the handling of Section 138 matters when procedural delays and technical defenses are presented in appellate courts.

D) FACTS OF THE CASE

The appellant issued a cheque amounting to ₹10 lakhs in favor of the complainant, which was dishonored due to “insufficient funds and account dormant.” He was prosecuted under Section 138 of the NI Act. During trial proceedings, the appellant filed an application to verify his signature through a handwriting expert, which the trial court denied, stating that it seemed to be a tactic to delay the trial. The appellant did not further contest this order, allowing it to attain finality. Upon conviction, he appealed and sought additional evidence for a signature comparison through Section 391 CrPC, which was again denied by both the Sessions and High Court. The Supreme Court was approached to examine the necessity of additional evidence in this context.

E) LEGAL ISSUES RAISED

1. Whether the appellant was entitled to additional evidence under Section 391 CrPC to prove a signature mismatch.
2. Whether the presumptions under Sections 118 and 138 of the NI Act could be challenged without substantial evidence presented during the trial.
3. Applicability of procedural fairness and rights under the NI Act in cases where initial defenses are neglected.

F) PETITIONER/APPELLANT’S ARGUMENTS

The appellant argued that:

1. Signature Mismatch: His signature on the cheque was forged, and hence the cheque could not have been lawfully issued by him. He sought expert opinion at the appellate stage under Section 391 CrPC to substantiate this claim.
2. Failure of Justice: Denial of the application for additional evidence under Section 391 CrPC constituted a failure of justice since it prevented him from effectively challenging the presumption of authenticity under Section 118 NI Act.
3. Notice of Dishonor: The appellant contended he did not receive the statutory notice of dishonor under Section 138 NI Act, suggesting that the Post Office official should be summoned to verify this.

G) RESPONDENT’S ARGUMENTS

The respondents, represented by the State of Gujarat, contended that:

1. Finality of Trial Court Order: The appellant’s application to verify the signature was denied during the trial, and he did not appeal the order, thus allowing it to reach finality.
2. Lack of Diligence: The appellant did not raise his signature mismatch claim effectively at trial, failing to question the bank official regarding the authenticity of his signature, which negates his right to raise the issue in an appeal.
3. Statutory Presumptions: Under Section 118 and Section 138 of the NI Act, the cheque is presumed genuine unless convincingly rebutted. The appellant’s delay in pursuing this defense and failure to bring substantial evidence could not shift the onus of proof onto the respondent.

H) JUDGEMENT

a. RATIO DECIDENDI

The Supreme Court held that:

1. Presumption of Validity under NI Act: Sections 118 and 138 of the NI Act presume the genuineness of a cheque unless rebutted by substantial evidence. Since the appellant failed to present this defense during the trial adequately, the presumption stood in favor of the respondent.
2. Section 391 CrPC and Due Diligence Requirement: Section 391 CrPC permits additional evidence only if the party was diligent in raising the evidence during the trial. Since the appellant failed to exercise this diligence, the Court found no reason to allow additional evidence.
3. Procedural Finality: The trial court’s denial of the handwriting expert application attained finality when the appellant did not challenge it. This procedural lapse limits the scope for introducing new evidence at the appellate level.

b. OBITER DICTA

The Court observed that:

1. Burden of Proof in Cheque Dishonor Cases: The accused holds the responsibility to contest the presumption under Section 118 effectively within the trial framework to avoid prejudice to the respondent.
2. Judicial Discretion under Section 391 CrPC: Section 391 CrPC is a discretionary power, not a procedural right, and must be applied to ensure substantive justice rather than facilitate tactical defenses or delays.

c. GUIDELINES

The Court provided guidance on the use of Section 391 CrPC in similar cases:

• Substantive Evidence at Trial: Defenses related to signature authenticity must be substantively presented during trial and cross-examination of witnesses.
• Timeliness of Applications for Evidence: Any application for expert opinion should be timely and diligently pursued. Procedural decisions reaching finality are unlikely to be revisited at the appellate level.
• Limits of Additional Evidence in Appeals: Section 391 CrPC is limited to situations where new evidence is essential for justice and could not have been presented at trial despite diligent efforts.

I) CONCLUSION & COMMENTS

The decision underscores the stringent procedural and evidentiary standards in cheque dishonor cases under the NI Act, especially regarding statutory presumptions favoring the complainant. It emphasizes the importance of timely defense strategy and due diligence during trial. By restricting the discretionary use of Section 391 CrPC, the judgment reinforces the finality principle and discourages tactical delays.

J) REFERENCES

a. Important Cases Referred

1. Bank of Baroda v. N. G. Subbaraya Setty, AIR 1971 SC 1320 – Statutory presumptions under negotiable instruments.
2. Vijay v. Laxman & Anr., (2013) 3 SCC 86 – Burden of proof in Section 138 cases.

b. Important Statutes Referred

1. Negotiable Instruments Act, 1881 – Sections 118, 138.
2. Code of Criminal Procedure, 1973 – Section 391.
3. Bankers’ Books Evidence Act, 1891.
4. Evidence Act, 1872 – Section 73.